To hear some people (*cough* fanboys *cough*) talk about Android, you'd think it was an altruistic gift that Google bestowed on the world, getting nothing back in return other than endless love and affection from users.
Google's financial figures from last Friday confirm this.
Google now has activated some 190 million Android devices worldwide. That's a big number, but a far bigger number is the $2,500,000,000 that mobile users are generating for Google yearly, a figure that's gone up 2.5 times over the past 12 months. And it's not hard to imagine this easily doubling to $5 billion over the next 12 months.
How is Google bringing in this cash? By doing what Google does best ... ads (and you thought I was going to say search, didn't you!). But Google can push ads all over the web without needing a device to do it. Where does Android, and specifically tablets and smartphones running Android, fit into this picture? Google CEO Larry Page tells us exactly how:
Generally I've found that high usage products will make a lot of money over time for well managed technology companies, and that's why it's so important to run these businesses for the long term.
High usage products such as smartphones and tablets. Oh yes. Microsoft CEO Steve Ballmer might not have been able to see the potential of Android, but Google did. You'd have thought that Microsoft of all companies would have understood the importance of controlling the platform.
Google doesn't charge a licensing fee for the Android OS, and doesn't keep a cut of the Android Market sales (70% goes to devs, with the remaining 30% split between the carriers and payment processors), but it does offer a great platform for shepherding users to Google properties where they can look at ads (while they do other stuff too, of course!). Then there are apps, which can also be home to ads thanks to Google's $750 million purchase of AdMob.
It's interesting to see how three different companies makes money from mobile. Google is interested in the ad revenue generated eyeballs and clicks, Apple is interested in selling the hardware at healthy profit margins, and Microsoft makes money from licensing.
Android is hugely important to Google and a big threat to Microsoft and it's Windows 8/Windows Phone plans (hence the squeeze the Redmond giant has been putting on Android ODMs, demanding fat royalty payments in exchange for patent infringement indemnity). These two companies are fighting for whatever scraps are left behind by Apple so expect the fighting (both in ads and in the courts) to escalate as the pool of potential users increases. The battlefield is going to get bloody.